Financial Intermediation and The Nigerian Economy (1986-2020)

Abstract

This study examined the effect of financial intermediation on the Nigerian economy for the period 1986 to 2020. The objective was to probe the effect of Money Supply, Private Sector Credit, Lending Rate, and Gross National Savings on Real Gross Domestic Product in Nigeria over the period. The data analyzed was gotten from the 2019 Central Bank of Nigeria’s annual issue of the Statistical Bulletin and the 2019 issue of the world development indicators (WDI). ARDL bound cointegration test revealed a long run relationship between the explained and the explanatory variables. The adjustment coefficient CointEq(-1) showed that any initial distortions in the economy will attempt to adjust to the state of equilibrium at the rate of 88 % per annum. ARDL analysis indicated the effect of Money Supply on real GDP of Nigeria is positive and significant, Private Sector Credit and Lending Rate respectively have negative and significant effects, while Gross National Savings had a negative, but insignificant effect. The study concluded that although financial intermediation has a strong effect on Real GDP of Nigeria over the period, the process is highly flawed; and recommended stringent measures to further supervise bank credit administration if positive results must be achieved.

Keywords: Financial Intermediation, Real GDP, Money Supply, Private sector credit, Lending rate, National Savings.

JEL Classification Codes: E4, G2, O47

DOI: 10.7176/RJFA/13-12-05

Publication date:June 30^th 2022